Good evening to everybody - and it is a pleasure for me to be here - sharing my thoughts on 'The basic material industries, and its impact and implications on the global development'.

There is no doubt that, ever since industrialisation began, basic materials have been the foundation, on which global economic growth has taken place around the world. They have been the prime engine of growth and have also been responsible for improving the quality of life of people around and I believe it will continue to be so in future.

The speed with which the basic materials are being consumed is ever increasing. For example, the entire world consumed some 4 billion tonnes of steel in 50 years between 1900 and 1950. However, in the next 50 years, this increased to 27 billion tonnes- about 7 times. In the last 6 years, between 2000 and 2006, the world has already consumed 6 billion tonnes, that is about twice the rate of the last 50 years. The consumption of steel in the last 5 years has been more than the total consumption of steel in the 50 years between 1900 and 1950. This is true of most basic materials. If anything, this speed will only accelerate. In economies such as the US, Europe, Japan and South Korea, the per capita consumption of steel is actually higher than the per capita consumption of food.

We all know that basic materials consume natural resources and there is this endlessly debated question on whether the natural resources will one day be exhausted or will they last forever. Let me deal with this highly opinionated subject.

The basic observation that earth's natural resources are finite and will eventually get exhausted is something that sounds logical and to most people's mind it will occur as natural. But this issue is not as simple as that. There are many people in the world who say the following:

• That increased consumption causes resources to become scarce in the short run. And this heightened scarcity causes prices to rise. Higher prices present an opportunity and the need to find solutions. Solutions are eventually found, and the new developments leave us better off than before and then prices eventually become lower than before the increased scarcity actually occurred. This has also been seen in practice.
   

• That the effective stocks of natural resources actually increase by

• technological innovations in extraction and processing ,

• substitution effect of one resource for another,

• technological changes that facilitate recycling, and

• improvements in product design that use less natural resources than before.

• They show you evidence that technological innovation has indeed provided continual increases in the effective stocks of the so-called "finite" resources. For example -

  • The fact that the real cost of extraction of some 13 selected minerals actually declined between 1870 and 1956.

  • The fact that until the man-made energy crisis of the '70s, there was a negligible upward trend in the real prices of coal and natural gas and virtually no increase in crude oil prices between 1900 and 1986.

  • like the even more striking price history of the non-fuel minerals - very slow rise in iron ore prices over a hundred year period; actual reduction in real prices of certain metals over a 70 year period.

  • They will tell you that there are hardly any signs of imminent exhaustion.

  • They will show you data which indicate actual increases of certain resources over a 50 year period in spite of consumption during that period.

  • They will argue that the current price of a natural resource reflects fully not only the current condition of demand and supply but also the future supplies and left over reserves; and that market is a great reflector of reality.

As you can see , there are two theories as regards "scarcity" or "abundance" of natural resources.

I must admit that the theory of "abundance", or that technological innovations will more than make up for consumption and that depletion of natural resources is not inevitable, is a theory that has stood so far. After all, we have not run out of any natural resources till now. The authors of the theory of "Limits to growth" have not been proved right, at least so far.

So which view should one take?

I take the view that inspite of current and future technological innovations in extraction, processing, recycling, light-weighting of products and so on, the more dramatic speed of recent and possible future consumption increase will make natural resources scarce.

The last 5 years have given us an indication of the new world we are entering into. The new world, where furious development is taking place in populous countries like China and India, representing some 40% of the world's population and added to this is the pace of growth in Brazil, Russia and in some Asian countries. The world took some 150 years to reach from a near zero consumption of steel to the consumption level of 1.2 billion tonnes per year now. I expect the next 1.2 billion tonnes in half that time period, perhaps in about 50 to 75 years. Between 1950 and 1975, when the US, Europe and partly Japan were building themselves, the global steel consumption grew by 450 million tonnes in those 25 years. But in the last 5 years, the increase is of a similar order - 400 million tonnes. This is the speed at which the world is growing, driven by the economies that are still developing. There are economies that are yet to join this growth race. There is no stopping this.

I believe that the global consumption pattern has fundamentally and structurally changed in the last 10 years and historical trends are no longer valid. The world is already in the zone of natural resources getting depleted very fast. The theory of inexhaustible natural resources and the theory that the natural resources extinction is not so inevitable are, I think, finally beginning to prove wrong.

So what is the impact and implication of these global developments, of the rapidly rising basic material consumption and the fast depletion of natural resources?

I can see more intense fights for securing natural resources. I can see that there will be a higher level of protection of natural resources for a country's own needs. There will probably be more felling of forests and environmental degradation, more water shortages, more arguments on land use, more carbon dioxide emissions - unless we take serious cognisance of these and find technological solutions to solve these. Mankind, of course, will find solutions for these and I believe there needs to be a debate around the world in a far more intense manner than what is happening now. I also see more political alignments based on natural resources.

There will also be a reshaping of the world in terms of economic power. After all, it was only 600 hundred years ago that China and India contributed 60% of the world's GDP! Everything in life has a cycle.

Thank you!